Maria Cantwell: have gone through too much to allow this to continue. i yield the floor. ms. cantwell: madam president? the presiding officer: the senator from washington. ms. cantwell: i appreciate my colleague from michigan being out here, as she has repeatedly, to talk about how our process oftentimes breaks down and what the consequences are because there's probably no bigger

Maria Cantwell: consequence than what's happened to the state of michigan. and she fights every day to make sure that we're aware of what will help our economy and help main street, and so i thank her for that and i thank her for being out here to urge us to get off of a filibuster and on to important legislation that i

Maria Cantwell: think will help our country. i'm here also to talk about something that i want to make sure as we enter this floor debate that people aren't confused about. that is that we've made choices in the past that really have helped accentuate the situation we're in. and if we're going to get out of this situation, we have to be honest with ourselves that this is a time when we need to do our job and make sure that we

Maria Cantwell: understand the opportunity to make sure consumers are protected. i want to start, madam president, by talking about the commodities exchange act because there's been a lot of debate here about what various committees have oversight and what the important issues are here. and, for me, there's no more important issue than making sure

Maria Cantwell: the commodities future trading commission which has oversight of financial indexes has the authority to regulate what are called derivative markets. the reason i say this is so important is because it really is the fact that we allowed legislation to pass here in 2000, the commodities futures

Maria Cantwell: modernization act that legally deregulated these tkreufrgts. we had a commodities future trading commission chair, a woman named brooksleybourne who saw what was tried to do something about it. she tried to do something about

Maria Cantwell: it because the commodities exchange act oversight is to deter and prevent price manipulation or any other disruptions in the market, to ensure financial integrity of all transactions and avoid systemic risk and protect participants from fraudulent or abusive practices. now that's what was.

Maria Cantwell: and when she saw in the marketplace that there were these products that were being used that didn't,hat basically regulating derivatives. so that is in the 1998 time frame. so this problem has been around for a long time. she said, as we saw the demise

Maria Cantwell: of long-term capital management incurred a financial crisis at that time, she said let's make sure we are regulating these products. and what happened is that she was basically run out of town for her views. she was the chair of the commission at the time, and a bunch of people basically influenced by wall street came down to washington, d.c.

Maria Cantwell: and said, you know, that's the wrong idea. we don't need to do this. this problem isn't going to be an issue for us. and so not only was she prohibited as the chair of the commodities future trading commission to fulfill this act, to make sure that we regulated this market, not only that, legislation was passed here by

Maria Cantwell: the congress prohibiting us from regulating these derivatives. now imagine that. you actually had a chair of the commission doing their job; you actually had her calling out a problem in the market on her responsibilities on oversight. and not only was she told no that she couldn't regulate those; congress prohibited her from doing that in the

Maria Cantwell: commodities future modernization act. how did we get to that situation before? you know, i get it because i had to live through the enron crisis in our state, and a lot of people cooked up off-book accounting. and people at first said it is a bunch of environmentalists not allowing us to have energy supply. that's why we have an energy crisis. then people said, oh, well,

Maria Cantwell: we're having an energy crisis because we don'tave enough refineries. we found out that it was people mapulating supply and demand with various schemes called dust star, get shorty, a variety of things that all came down to this: off-book accounting. how could you fool the accountants into believing that your scheme was legitimate?

Maria Cantwell: so it should be no surprise that in 19 -- i think it's 1994 that in a little, you know, retreat effort -- you know, some of us go on retreats and talk about our policy issues. well, here some of the titans of wall street went down to boca raton, about 80 j.p. morgan

Maria Cantwell: bankers and started to wonder if there was a way to create derivatives that could bet on whether bonds or default. okay, tt's what they did. they were down in bocaaton saying basically how can we do off-book accounting to figure out ways in which we c bet on these things. so that's what happened. and that was the start of this

Maria Cantwell: and brooksley bourne called them out on it, basically was prohibited from doing it. so what happened when we prohibited -- when we prohibited the derivatives from being regulated? well, one of the cftc persons

Maria Cantwell: said all the fundamental templates that are learned from the great depression that are needed to have markets function smoothly were gone. these are things we put in place after the last fiscal crisis. we put them in place because we knew w the other side of the aisle led the charge on that deregulation, led the charge on the

Maria Cantwell: deregulation of derivatives and said let's keep our hands offer. thraoft four times -- at least four times we have had votes on derivative measures and those on the other side of the aisle said no, let's don't deregulate them. this is an important issue, and let me because when you look at capital

Maria Cantwell: markets, you have to have transparency. if you don't have transparency, people don't know what's going on and products can be manipulated. after the 2000 commodities future modernization act, basically on derivatives you had no transparency, no capital requirements, no prohibition on fraud, no prohibition on manipulation and no regulation

Maria Cantwell: of the intermediaries. why are we surprised that we ended up in this situation? because if we basically took what had been the fundantals of the last fiscal crisis and put them in place in a law and then basically were warned and we deregulated them, why are we surprised that we ended up in this situation?

Maria Cantwell: because after deregulation, what it trading, at least on these derivatives. on other products, you had certainty and you had predictability. but on these products, let me be more specific, you had what were called dark marts. and that meant because you couldn't see into these dark

Maria Cantwell: markets, you didn't really understand what was being done. i know that our colleague, senator levin is holding a hearing today, and he's going to get to the bottom of exactly what was going on in those dark markets and who was trying to manipulate them. but the fact that they were dark and not traded meant that you couldn't see the price that somebody was paying and thereby understanding what was going on in the market.

Maria Cantwell: so you had no transparency. and you also had, you know, no requirements to keep records, no large trader reporting, which would have been things that the cftc would have said i can look at that a see whether manipulation is happening. you had no speculation limits.

Maria Cantwell: another thing that happens on the stock markets or on trades that happen now -- i mean we hear about it all the time -- is that if somebody thinks that somebody is messing around with the market, you can have limits. you can come in and, on an exchange or an agency can come in and say we're going to stop that kind of trading because we have concerns about what's going on.

Maria Cantwell: and we also know that there was no capital behind these bets as well, which, you know, is very alarming to a lot of people that, you know, the synthetic c.d.o.'s were cooked up and had no capital behind them. and i know my colleague, senator dorgan, has been out on the floor and talking about legislation, an amendment he's

Maria Cantwell: going to be offering on the senate floor to make sure that we close that. but what it created was just a high risk for fraud and manipulation and excessive speculation. that's what happened. that's what happened. so, when you derivatives market, what happened? it should be no surprise again

Maria Cantwell: to find out that when we deregulated it, the m exploded. here's where we were in 1999. there were some derivative products. but now look at it. it peaked a $700 trillion. it somewhere leveled off at $600 trillion.

Maria Cantwell: a $600 trillion market in derivatives drew because we created a dark market opportunity in which people couldn't really, not everybody could really understand what was going on. and certainly the regulators who used to have a day job of overseeing this, were prohibited from doing their day job. and i should add, madam president, not only were the regulators prohibited from doing their day job, in that

Maria Cantwell: commodities future modernization act of 2000, we also had a provision in there that said states aren't able to use their authority to look into these markets and market activities as well. we did two things. we prevented federal regulators from doing anything. and we prevented the state regulators from doing something as well.

Maria Cantwell: and now we have this unbelievable, unbelievable, unbelievable market of activity. so my colleagues on the other side of the aisle like to talk about innovation. well, i know a little bit about innovation. i worked for a company that was a and when i look at that, yes, you have to have financial markets on wall street that help

Maria Cantwell: those companies get financing through their very early stages. that's what's so important about our financial markets operating effectively. but you can see from this chart -- or maybe you can't. maybe you can't see from this chart because it's so hard to see. but at the very bottom here is a little yellow line, and that

Maria Cantwell: yellow line represents the assets, the assets that people -- the loans that these banks are making, the amount of money that's in loans, in capital going to businesses that are the true ideas of innovation. now, there's a lot of innovation here in derivatives. now we know what it is.

Maria Cantwell: dark market be derivatives that cooked up things like c.d.o. and synthetic instruments to basically bet against bonds because somebody had securitized loans to banks that were risky bank loans anyway and then tried to make somebody believe that that was a great way to cover them financially. so all of it was just a game. and that's what

Maria Cantwell: so we're not helping the american economy in investing in detroit or investing in software. not the way we used to. we're basically investing, and people are making a ton of money in dark market derivatives. that's why it's so important that we this legislation. and just to give you an idea of

Maria Cantwell: where people are making the money, because i know some people like to say, well, you know, let's, you know, get out here and make sure we do something for small business, which i think is it's incredibly important that we do that. but you're not going to get the big banks to make a bunch of loans to small businesses, as

Maria Cantwell: that last chart just showed you, when they can make money in dark market derivatives. this chart here shows the increased profits that they have had since 2008. so you've actually had a decrease in lending. you've actually had a decrease in the amount of capital going out to the tune of something like $547 billion, and you've

Maria Cantwell: actually had an increase in trading profits. so we know where the money is going. wall street's not putting money into main street. wall street's putting money into wall street dark markets. and we have to get on this legislation to fix that. so what would we do well, if my colleague from the

Maria Cantwell: agriculture committee's mark is put into this legislation,s i believe the leader is going to do, then you have a choice of having an unregulated market, or with this regulated market with exchange trading. people say, what does that mean, exchange trading? i don't understand.

Maria Cantwell: what is that going to solve for us? just as i said how dark the market was and no one knew what was going on, when you have a product that is traded on an exchange, you actually have transparent pricing so people can see what the pricing is. just like the situation being described right now in the senate oversight committee about people didn't know what was

Maria Cantwell: going on or who was paying what or who was behind what bets. you have transparent pricing and you have realtime trade monitoring. you know because someone is monitoring those trades, you know exactly what's happening in the market and who's moving what and how they're moving it.

Maria Cantwell: and you have a transparent valuation. if you go back and you have time and read this latest book out by michael lewis, "the big short," he talks about how people didn't know exactly what was going on on the valuation of this because it was being hidden from them. and so they had no way of understanding exactly what the value of these products were.

Maria Cantwell: that's why this scheme was able to be ppetrated on people because they didn't know what the true valuation is. if you have exchange trading, you actually have speculation limits and you have public transparency. so when we're out here debating this -- and i hope my colleagues on the other side of the aisle will support exchange trading. i heard one of our colleagues on the other side of the aisle say

Maria Cantwell: i don't think that's the solution. well, by my book, it's absolutely the solution. it's absolutely the solution. just as it is for the stock market, who would buy stock on the stock market if you didn't have oversight of the exchange, if you didn't have these kinds of things: transparency,

Maria Cantwell: realtime monitoring, speculation limits? who would go buy stock on the stock market if that was the case? so why do we think the deriff alternatives can operate in the dark -- the derivatives can they can't. the other thing we will be talking about here on the floor is that unregulated trading doesn't have any capital behind the trade if you had a clearinghouse

Maria Cantwell: involved, exchange trading and a clearinghouse, you actually have capital behind these trades and people know that somebody has the ability to deal with this transaction that they are betting on. so, madam president, t the things that we need to do. these are the things that are critical to the type of reform that we need to get done.

Maria Cantwell: i am concerned that we're not going to get to this legislation, that dark market is going to continue to operate that way, or that people are going to propose loopholes to basically water this legislation down. and, you know, we've had a lot

Maria Cantwell: of conversation about loopholes, and one of them is the end user loophole, and basically anyind of loophole in this legislation, it's -- you know, it's kind of like water. e money is going to flow where it can. if it's a dark market, that's where the money is going to flow. we had a hearing of the commerce

Maria Cantwell: committee in 2008, you know, six or seven months before the big bubble burst and george sorrows came to testify and -- and george soros came to testify and said we're inside a bubble and it is going to cause great concern. he knew then because he knew what kind of activity was going on. and he talked in his testimony how important it is what if you

Maria Cantwell: applied regulation, you had to apply them both to the regulated and unregulate $market, because if you don't afly to the unregulated market, all the money moves over to the unregulated area. so i appreciated this "new york times" editorial that basically said, if end users are exempted, then trillions

Maria Cantwell: of transactions could avoid the exposure and stability that comes with exchange so that's what we're going to be trading out here, about whether you're going to have the kind of oversight and you're going to make sure that we end up putting the kinds of regulations in place that we need.

Maria Cantwell: that strongerivatives reform, as another "new york times" editorial said, "strong derivatives reform is a matter ofutting taxpayers first -- ahead of big banks and corporate america that are fighting hard for a return to the risky business as usual." we don't need rickey business as usual, madam president -- we don't need risky business as usual, madam president. we need to reform these markets.

Maria Cantwell: let's get capital flowing again to innovation, service, in important areas of our economy, and know that a fundamental rule to markets and capitalism is to have traparency and that the legislation we're considering about do just that. hopefully the republicans will say what true reforms they are

Maria Cantwell: for and realize that, in the past, they have been against some of the derivatives reforms that would have stopped us from having this yield the floor. i suggest the absence of a quorum. the presiding officer: the